A consumer proposal is an alternative to bankruptcy in Canada. A licensed consumer proposal administrator works with you to negotiate a settlement with your creditors. For example, if you owe $40,000 on credit cards, bank loans, payday loans and taxes, it might be possible to negotiate a settlement where you pay half, or even a third of the full amount owing.
An example of a consumer proposal would be where you agree to pay $300 per month for 50 months, for a total of $15,000, and your creditors agree to eliminate the rest of your debt.
Why would your creditors accept a consumer proposal?
The answer is simple: they do not want you to go bankrupt. They would prefer to receive something, instead of perhaps nothing in a bankruptcy.
To determine if a consumer proposal makes sense for you, make a budget and determine what you could afford to pay each month if that payment included all of your unsecured debts. (You could still keep paying your secured debts, like your mortgage and car loan).
You should then talk to a consumer proposal administrator, who is also a licensed bankruptcy trustee, to determine if the amount you can afford to pay each month would be a sufficient settlement for your creditors.
If it is, a consumer proposal may be a great way to avoid filing bankruptcy in Canada.